Section 1031 of the Internal Revenue Code (“1031 exchange”) provides that real property held for rental property tax deductions, investment or use in a business (“relinquished property”) can be exchanged for “like-kind” real property also held for rental, investment or use in a business (“replacement property”) …

How do I defer real estate taxes?

The 1031 exchange, named for Section 1031 of the Internal Revenue Code, allows investors to defer taxes by selling one investment property and using the equity to purchase another property or properties of equal or greater value. This exchange must occur within a specified period of time.

How do I defer taxes on sale of rental property?

Use a 1031 Tax Deferred Exchange Section 1031 of the Internal Revenue Code allows real estate investors to sell a rental property, buy another property at an equal or greater value, and defer paying tax on the capital gains.

Is there a way to defer capital gains on a rental property?

Selling a rental property means freeing up capital, hopefully nabbing a tidy profit, and moving on to the next great opportunity. It also means paying taxes on those gains unless you have a plan to defer them. One of the most common capital gains tax deferment methods utilized by real estate investors is the 1031 exchange.

How to defer taxes on the sale of a property?

The only way we know that you can efficiently and effectively defer paying taxes on the sale of the property is by using a 1031 exchange.

What kind of taxes do you pay when you sell a rental property?

Capital gains tax will typically be the most important tax consideration when selling a rental property. If you don’t take any action to defer capital gains taxes, the profit from the sale of your property is taxed at the following rates.

Do you have to pay recapture on rental property depreciation?

Yes, the IRS allows rental property owners to deduct depreciation over a 27.5-year period. However, if you decide to sell the rental property, you’re required to pay a 25% depreciation recapture tax on prior depreciation deductions.